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Infographic: How much interest-only home loans are costing property investors in 2017

Some facts about property investors and interest-only loans

Here’s how interest-only loans stack up against principal and interest loans for property investors in 2017.

  • According to ASIC, up to 70% of property investors use interest-only loans
  • Interest-only borrowings in Australia rose from $88.7 Billion in 2012 to $153.8 Billion in 2015
  • In 2017, lenders have increased interest-only loan rates by up to 0.7% p.a. compared with principal and interest rates. Current interest rates can typically be 4.3% p.a. for an interest-only loan, but only 3.9% p.a. for a principal and interest loan – whereas at the start of 2017, the interest rate for the two loan types approximately equal.
  • Assuming an example situation involving a $544,000 home loan over a 30 year term for an investment property worth $680,000, and assuming the owner has a personal gross income of $118,000 a year and $300 a week rental income..
    – An interest-only loan would yield a higher annual tax benefit ($3,039 versus $2,123), and lower monthly mortgage payments ($1,949 versus $2566)
    – But, after one year, a principal and interest loan would pay off a whopping $9,748 of the principal – which nets out as principal and interest being the better option to the tune of $3,778 in the first year alone.

How much interest-only home loans are costing property investors in 2017

 

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To find out whether you’d be better off choosing an interest-only loan, use our calculator right here:

And if you want to take it one step further than the calculator, you can live chat with a mortgage adviser here.

This information in this article is general only and does not take into account your individual circumstances. It should not be relied upon to make any financial decisions. uno can’t make a recommendation until we complete an assessment of your requirements and objectives and your financial position. Interest rates, and other product information included in this article, are subject to change at any time at the complete discretion of each lender.

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Helen is Head of Content at uno - the smarter, faster way to get a better home loan.

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